Retailers urged to do better on big data

Sue Mitchell

Retailers such as Myer and Woolworths have been urged to quiz customers when they leave stores empty-handed and grill shoppers who spend money at rival chains, to achieve better returns on their investment in big data.

Spending on data analytics is rising by 30 per cent a year and is forecast to reach $US114 billion ($147.6 billion) by 2018, according to global consulting firm AT Kearney, but only one in 12 companies is achieving a satisfactory return on its investment.

"There's massive investment in analytics, everybody says it's a strategic imperative, everybody believes it's something they need to do in order to be competitive, but between 75 per cent and 90 per cent of people are dissatisfied with the returns they're getting," AT Kearney principal and analytics expert Ian St-Maurice said.

Woolworths is a case in point. The food and liquor retailer has arguably invested more in data analytics than any Australian retailer, buying 50 per cent of analytics firm Quantium and using information gleaned from credit cards, loyalty cards and e-commerce sites to identify growth opportunities. However, it has little to outwardly show for its investment, with sales and earnings growth slowing over the past few years and customer loyalty stagnating.

At Myer, which has just hired technology and data expert Richard Umbers as its new chief executive, sales have been going backwards for 20 years despite the company's attempt to drive topline growth by analysing spending on its loyalty cards and online store.

Mr St-Maurice, who advises retailers, telcos, consumer goods and financial services companies in the Asia Pacific, says many companies are spending too much time and money collecting data and taking a broad-brush approach to analysis when they would be better off using more targeted approaches to tackle specific problems.

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"If you try to boil the ocean you're not going to move anything," Mr St-Maurice said.

Supermarkets, for example, should abandon trying to convince the most promiscuous shoppers to become loyalists and focus their efforts on retaining their most loyal or semi-loyal customers by tracking their spending and making sure they were never short of their favourite products.

Some event drives a switch

"I don't think there's a lot of value in hunting people who might at best be break-even for you and might actually destroy value for you if you offer them too much," Mr St-Maurice said. "If I were Woolworths or Coles I'd like to understand those people who are not quite promiscuous but still tend to stray to the competition.

"Often there is some event like a specific stock-out of their favourite item or something else that drove them to another retailer," he said.

"What I'd love to do is talk to that customer, ideally an hour or a day after their shopping trip and ideally at their kitchen table rather than a sterile lab, and have a face-to-face conversation with them to find out why they shopped elsewhere."

There's massive investment in analytics, everybody says it's a strategic imperative, everybody believes it's something they need to do in order to be competitive.

Ian St-Maurice, principal and analytics expert, AT Kearney

Department store retailers such as Myer needed to pinpoint where they were losing sales – whether through unproductive foot traffic and low conversion rates, small baskets or too many people buying on promotion – and use analytics and quantitative research to establish why customers weren't spending more.

"It's about getting a higher-level understanding of where, along that value tree, they think they're losing the game, and then focusing their qualitative and quantitative efforts on those levers and then testing and trying different approaches to turn things around," Mr St-Maurice said.

If the problem was low conversion rates, stores should consider conducting exit interviews with customers, asking those who leave empty-handed why their shopping mission had failed.

"If it's done in a positive way, as long as you are very targeted with your questions, most people don't mind," Mr St-Maurice said.